Most Important Story of the Week and Other Good Reads – 9 November 2018: How the Elections Could Impact Hollywood

Over the last few weeks, there were big stories (elections), tragic stories (devastating forest fires in the southland), and heart-breaking stories (the shooting in Thousand Oaks). So many stories that it gets hard to stay focused on the business of media and entertainment. So a few days/weeks late, here is my round up of stories I’ve been following. I won’t touch the personal tragedies as they’ve been covered better by other news outlets.

I struggled to call out a “most important” story, with the election gobbling up media coverage. So you know what…

Most Important Story of the Weeks – How the Election Could Change Regulation

As everyone knows, Democrats took control of the House of Representatives while Republicans held onto the Senate in the American elections of last week. (Then came a bunch of other political news. If you follow most entertainment journalists on Twitter, you don’t need me to repeat it for you.)

The key is the ramifications for business. First, what I don’t think will happen. I don’t think there will be a sudden wave of anti-trust regulation. I don’t think there will be a wave of pro-consumer legislation like finally addressing the United States unwieldy IP/patent/copyright law. The Democrats only control one branch of the Federal government, and will still battle a hostile Senate and hostile President Trump to pass any new legislation. Betting on the status quo is always a good bet in our current political climate.

What could happen? Well, caution in rolling back some regulations. The chairman of the FCC, Ajit Pai may be just a little be more worried than before the election about his agenda of wholesale deregulation of media & entertainment. (In fact, he’d already blocked one merger in the broadcast space.) Under threat of testifying on the hill multiple times, he may dial back a few of his more controversial proposals. With their newfound agency, Democrats could tie some consumer-protection measures to budget bills, such as support of municipal broadband or, gasp, net neutrality. Again, I’m skeptical but they could try. Also, as Variety noted here, Hollywood could pressure Democrats to put pressure on tech giants to fight piracy. Again, could, but likely no bills will result.

Then you have the wildcards. Not saying they will happen–I mean, is a wildcard a 10% or less probability?–but I’m thinking about them. My first wildcard is President Trump going crazy with antitrust legislation on his enemies: AT&T/Warner (cause CNN), Comcast (cause MSNBC) and Amazon (cause Jeff Bezos). I think he isn’t focused enough to follow through, but wouldn’t bet against him, especially if his new Attorney General sticks in the role. At the local level, I’d look at “municipal broadband”. Since everyone hates their cable providers, with lots of new Democratic gains in state houses, more states and cities could try their hands at alternatives to traditional cable companies.

The final wildcard would be legislation that finally addresses robocalls. Any politician who stopped all the annoying phone calls would become a hero to consumers. (That’s a hint for politicians already thinking about 2020.)

Other Contender for Most Important Story – BlumHouse Does it Again

Another horror film by Jason Blum, another box office smash. (Current numbers are $76 million opening weekend and $151 domestic box office to date.) That said, this one feels a bit more expensive production-wise (Jamie Lee Curtis, Halloween franchise owners) than past BlumHouse super hits. Still, he’ll definitely make his money back. Again. (Blum was rightfully feted in THR in a good read.)

Lessons: First, there are only a few true hit making development execs in Hollywood, and Blum is one. I feel confident in saying the latter and I’ll prove the former in a future post. Second, unlike other independent-ish outlets–Annapurna, Weinstein, Global Road–BlumHouse makes movies for the popular crowd and does well. Third, not to throw cold water, and to refute my first point, but horror is just a successful genre right now. The biggest horror/thriller last year wasn’t even BlumHouse’s Get Out, it was It. (Seriously, look it up.) The Quiet Place also did well earlier in the year. Context matters, and horror is doing well.

Lots of News with No News – Streaming media stocks moved wildly in down swing

Don’t pay attention to the stock market, or use it to judge the performance of company executives. Stock prices may be the goal, but how stock prices move can mean lots of things for lots of reasons, and divining why individual stocks went up or down is just that, divination. Use it as one number among many to judge a company.

So while I noted that Netflix took a large downswing in the recent market correction, I’m hesitant to put it as tmy biggest story or even draw conclusions for why it happened. Instead, let’s just note that in market volatility Netflix, with other tech biggies, seem to take the biggest drops. (Percentage and real dollars). The reasons why? I don’t know, but it could mean entertainment and media stocks have increased risk in future downturns, which could impact the ability to borrow.

Lots of News with No News – JJ Abrams Will Get a New Overall Deal

I love comparing sports teams to media companies (check out my NBA translator here) and huge deals to woo talent seem like the most immediately comparable. Is signing LeBron James for the Lakers the equivalent of signing Miami signing LeBron in 2011…or the Knicks signing Amare Stoudamire in 2011? In baseball, teams have won world series off major signings, or busted, like the Angels signing Albert Pujols to a huge deal.

I understand why so many companies are fighting for the right to sign JJ Abrams, but this just reeks of the “winner’s curse”. I mean, Paramount regrets their last overall deal with him, don’t they? Are two good Star Trek movies worth his tens of millions of dollars in fees? Really, I can only see two studios (maybe three if I squint at Universal hard enough) that would stand to benefit from gaining the services of JJ Abrams. If I’m Disney, I probably don’t push too hard since you have a good thing going without him. (I’d save the money for Kevin Feige.)

Either way, I don’t think this will move mountains.

Big Data and Fun Idea – From Deadline: What would netflix do without Friends?

This article has really resonated with me, especially as I’ve been thinking about Netflix’ hidden data. The first, obvious takeaway: Friends remains really, really popular, and if it leaves one day for to-be-named Warner streaming service, how many customers will go with it? I’m not convinced Netflix/Wall Street has properly priced in this worry.

But that’s an obvious take, Entertainment Strategy Guy. Go deeper.

Okay, I’ll ask this: where are all the streaming shows on this list?

Parrot Analytics measures “demand expressions” globally, and since I don’t know how they do that I’m naturally skeptical. I could also analyze the data multiple ways to both challenge and reinforce it’s value (for example, SVOD has a built in advantage globally over broadcast channels), but that’s their metric. And in their weekly top ten lists, Netflix dramas do fine. But I don’t see any Netflix sitcoms on this list or any other publicly available one.

So we know everyone is leaving traditional TV for streaming…but the top ten sitcoms on this list are all from cable or broadcast. And sitcoms do tend to still do well on broadcast ratings compared to drams, though not as well. Does this mean that Netflix hasn’t had a hit sitcom yet, including The Ranch or Unbreakable Kimmy Schmidt? I’d argue that’s exactly what it means. But this flies against the perception that Netflix crushes it on every show.

In other words, when we get data from Netflix, we get a much more nuanced and mixed record of success than when we get only top line subscriber numbers or quotes from executives. That too is likely not priced into their super high valuation.

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